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Thursday, January 16, 2014

Treading water In the Obamacare risk pool

You spend a year constructing a better mouse trap and now the complaint is it catches too many mice and only mice. One law that Obama cannot circumvent is the law of supply and demand. That law says in effect as price rises demand drops and as price declines demand increases. We have heard ad nauseam the counter factual cant that Obamacare is market based. It may be a good talking point and may be more palatable than saying it's a centrally planned, mandated, scheme that advantages some at the expense of others but market based it is not. The price is lower for the advantaged and higher for those who are disadvantaged meaning the price is too high for the latter group. The plan advantages the older at the expense of the younger, the sick at the expense of the healthy, and women at the expense of men and surprise! It has too many older, sicker, women. What rational person would have predicted a different outcome?
We have, at best, a very sketchy demographic breakdown of the enrolled population and the gender breakdown has yet to be revealed but every success story the administration has paraded about has been a woman. Of course men have enrolled in the plan and with family plans the gender bias cancels out but I'll predict that single women will purchase insurance much more so than single men simply because the plan is skewed to favor them. It's long been a Democrat contention that charging women the actuarially based cost of health insurance is sexist while ignoring the fact that women pay lower premiums on auto and life insurance. The issue, as contentious as it is, may never be addressed by the administration but it certainly will be by insurance company actuaries when they compute next year's premiums.
The sicker are advantaged because insurers may not refuse to write a policy if the applicant has a pre existing condition. They do not need to be coaxed into the plan but their insurance is subsidized by the healthy in the form of higher premiums.
The enrollment numbers released Monday confirm that the risk pool is more adverse than expected. Fifty-five percent of the enrollees are between the ages of 55 and 64. Enrollees in the 18 to 34 demographic are missing in action. To have a healthy insurance pool Obamacare must have from 38% to 40% of it enrollment in this age bracket. It has 24%. The administration counters that it will launch a massive ad campaign to ensnare the recalcitrant little brats. Yes, and if Dewalt Corporation announced it would target teenage girls to purchase its line of framing nailers they would be laughed into bankruptcy. The power of adverting has its limits. One can not sell a dead horse to everyone.
By any measure the young are the least able to carry the burden of the nation's healthcare. Obamacare is a massive redistribution scheme but there is no consideration given to the individual's ability to pay. In some markets even after subsides are added in families are on the hook for 10% of after tax income. Labor force participation has declined not only because older workers have left the market but because younger workers have not entered it. In the past both husband and wife entered the labor market now couples frequently marry with only one bread winner, usually the husband.The demographic earns less because fewer members are working.
From a Fox News post:

The real Pajama Boy has a 50 percent chance of being unemployed or underemployed, on average is laden with thousands of dollars of student-loan debt, and is increasingly likely to still live at home with his parents. For this “young invincible,” hot chocolate and health care are probably the last things on his mind.
And yet, in the modern liberal paradigm, Pajama Boy is less concerned with finding a job, getting married, or buying a house than he is with extracting benefits from the government — in this case, health care. Pajama Boy is a far cry from the Marlboro Man or Rosie the Riveter.

Throw in the additional costs of an essential date plan for his smart phone and the need to rollover the lease on his Subaru Outback every 3 years aside from the monthly rental and his financial health is anything but invincible. Obamacare advocates may argue that Pajama Boy is an unfair caricature of an entire generation but he is their caricature. In fact it's a self portrait. This is not the generation JFK said would bear any burden and pay any cost. This is the generation that has been conditioned to expect the most from government. This is also the generation Obama, Reid, and Pelosi bet would save Obamacare. They may want to tweak the mouse trap.